By committing to With our portfolio of companies, as well as with new investment opportunities, we’ve noticed that “profitability” and “efficiency” are two words that are often lumped together with “growth” in every sentence.
Three months into 2023, investors continue to use buzzwords like “responsible growth,” “business efficiency” and “quality marketing” when explaining how VC-backed companies should do business this year. That may be true, but there is no textbook on how a company can actively reduce its budget without slowing growth in the short term.
Over the past few months, we’ve vetted, tested, and reviewed more than 30 companies that we define as “tier one gross margin-enhancing businesses.”
What does this mean? The “first degree” part has to do with now. Investors are knocking on the door to see improvements every quarter. Companies that can help you with long-term efficiencies won’t help you the next time you’re looking to raise money in six, 12, or 18 months.
The “gross margin improvement” part of this definition is important because simply cutting costs instead of growth won’t work. Similarly, maximizing growth with little sensitivity to costs will not work in 2023.
In this article, we’ll look at start-ups that can efficiently and effectively support organizations in their efforts to deliver growth while optimizing and managing short- and long-term costs.
Given the market right now, investors want to see companies follow the forecasts more than ever.
The value proposition of the companies in this mapping is to help companies continue their growth journey while optimizing and reducing costs in their current business structure. That being said, there is no one-size-fits-all solution. For this reason, we have defined three key categories of gross margin improvement:
- Cloud infrastructure cost optimization and management.
- Supplier stack optimization and cost management.
- State-of-the-art FP&A tools.
Cloud infrastructure cost management and optimization
There’s a constant struggle to balance stepping on the gas to improve the product (ie increasing cloud spending) and pushback from the CFO’s office when it’s time to cut back.
CTOs and technical leaders know how to reduce cloud costs, but it can be difficult to determine how much a given change can negatively impact a business’ bottom line, not to mention the time it takes to execute reduction and optimization requests repeatedly. Businesses want to continue to grow and grow quickly, but they just can’t afford the freedom to flex their cloud spending like in years past.
Several companies are solving these problems with different approaches: Finout, Cloud Zero, Vantage, and Anodot support both enterprise and mid-market end users and offer solutions for managing the cloud and Kubernetes. Some of these players provide solutions to not only support major cloud providers, but also other cloud infrastructure providers (such as Data Dog and Snowflake).
Other companies focus on more specific use cases. For example, Kubecost focuses on managing Kubernetes. There are also companies that aim to help you cut costs: Zesty (for the cloud) and Cast (for Kubernetes) are in this space.